Tuesday, January 17, 2012

Update on the California Resale Royalty Class Action

The auction houses have filed a (joint) motion to dismiss. You can read the motion here; background about the case here.

The main argument is the Commerce Clause argument: as a "state law[] which seek[s] to regulate economic activity outside the State," the statute is "plainly unconstitutional." "[W]here State A purports to regulate the sale of goods occurring in State B simply because that sale involves a resident of State A, the regulation is invalid."

They also make the back-up arguments that the statute violates the Takings Clause -- "it confiscates the private property of select individuals and transfers that property to other private individuals" -- and is preempted by the Copyright Act (because it conflicts with its "first sale" provision, which "entitles a lawful owner of a copyrighted work to resell that work without restriction").

Along the way, they make the point that the statute is not a tax: "The resale royalty is neither exacted from the general public nor transferred to any government agency."